Correlation Between Earth Tech and Thai Solar

Can any of the company-specific risk be diversified away by investing in both Earth Tech and Thai Solar at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Earth Tech and Thai Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Earth Tech Environment and Thai Solar Energy, you can compare the effects of market volatilities on Earth Tech and Thai Solar and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Earth Tech with a short position of Thai Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earth Tech and Thai Solar.

Diversification Opportunities for Earth Tech and Thai Solar

0.82

Correlation Coefficient

Earth Tech  Thai Solar

Very poor diversification

The 3 months correlation between Earth and Thai is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Earth Tech Environment and Thai Solar Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Solar Energy and Earth Tech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Earth Tech Environment are associated (or correlated) with Thai Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Solar Energy has no effect on the direction of Earth Tech i.e., Earth Tech and Thai Solar go up and down completely randomly.

Pair Corralation between Earth Tech and Thai Solar

Assuming the 90 days trading horizon Earth Tech Environment is expected to generate 1.34 times more return on investment than Thai Solar. However, Earth Tech is 1.34 times more volatile than Thai Solar Energy. It trades about -0.07 of its potential returns per unit of risk. Thai Solar Energy is currently generating about -0.12 per unit of risk. If you would invest  226.00  in Earth Tech Environment on September 15, 2024 and sell it today you would lose (32.00) from holding Earth Tech Environment or give up 14.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Earth Tech Environment  vs.  Thai Solar Energy

Earth Tech Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earth Tech Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Thai Solar Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Solar Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Earth Tech and Thai Solar

The main advantage of trading using opposite Earth Tech and Thai Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Earth Tech position performs unexpectedly, Thai Solar can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Thai Solar will offset losses from the drop in Thai Solar's long position.

The idea behind Earth Tech Environment and Thai Solar Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.